Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Back-Testing Framework, 66154-66156 [2024-18077]

Download as PDF 66154 Federal Register / Vol. 89, No. 157 / Wednesday, August 14, 2024 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100679; File No. SR–ICC– 2024–008] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Back-Testing Framework August 8, 2024. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 30, 2024, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared primarily by ICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The principal purpose of the proposed rule change is to revise the ICE CDS Clearing: Back-Testing Framework (‘‘Back-Testing Framework’’). These revisions do not require any changes to the ICC Clearing Rules (the ‘‘Rules’’). II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, ICC included statements concerning the purpose of and basis for the proposed rule change, security-based swap submission, or advance notice and discussed any comments it received on the proposed rule change, securitybased swap submission, or advance notice. The text of these statements may be examined at the places specified in Item IV below. ICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. ddrumheller on DSK120RN23PROD with NOTICES1 (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (a) Purpose ICC proposes revising the BackTesting Framework, which describes ICC’s back-testing approach and procedures and includes guidelines for remediating poor back-testing results. The proposed amendments enhance how credit default swap index options 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 18:22 Aug 13, 2024 Jkt 262001 that expire in-the-money—within the margin period of risk, are treated for profit or loss purposes in back-testing and other clarifications. ICC believes that such revisions will facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible. ICC proposes to make such changes effective following Commission approval of the proposed rule change. The proposed revisions are described in detail as follows. ICC proposes to enhance Subsection 2.4. of the Back-Testing Framework by adding a detailed description on how in-the-money (‘‘ITM’’) expiring credit default swap (‘‘CDS’’) index option (‘‘Index Swaption’’) positions, within the margin period of risk (‘‘MPOR’’),3 are treated in back-testing. Specifically, the proposed revisions enhance how Index Swaptions that expire ITM within the MPOR, are treated for profit or loss (‘‘P/L’’) purposes in back-testing. The proposed revisions provide that with respect to Index Swaptions that expire ITM within the MPOR, for back-testing calculation purposes, the mark to market (‘‘MTM’’) value of the expired ITM Index Swaption positions are replaced with their corresponding intrinsic values (‘‘IV’’) 4 of such Index Swaptions based on their corresponding underlying CDS index’s end-of-day price at the given back-testing day. The ITM Index Swaption position, with a positive IV, results in an option exercise on the expiration date and reflects the positive value to the option holder of buying/selling the underlying CDS index position at the fixed option strike price and selling/buying the underlying CDS index position at the end-of-day price for a profit. Likewise, the sold ITM Index Swaption position, with negative IV, results in the assignment of an underlying CDS index position to the seller of the option on the expiration date, where the assigned underlying CDS index position could be bought or sold protection position depending on the type of the sold option instrument. The unrealized P/L for the exercised/ assigned ITM Swaption positions, within the MPOR, are computed against the underlying MTM, after the ITM Index Swaptions expiration date, for back-testing purposes. Also, ICC proposes the addition of Table 5, ‘Minimum 5-Day P/L Detail for 3 Margin-period-of-risk or MPOR for back testing purposes reflects the greatest considered risk horizon used for ICC’s initial margin requirements. 4 In the context of ITM Index Swaptions, intrinsic value or IV is the difference between the current price of the underlying CDS index and the Swaption’s exercise price. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 Expiring Options Positions’ to Subsection 2.4. Table 5 provides an illustrative example of the computation of MTM and unrealized P/L for backtesting purposes for an ITM Index Swaption position that expires within the MPOR. The example calculation provided in Table 5 is intended to provide further transparency of ICC’s back-testing P/L treatment of ITM Index Swaptions that expire within the MPOR. ICC proposes additional clarifications to the Back-Testing Framework. The proposed amendments include the addition of footnote 1 in Subsection 1.1 that clarifies ‘Net Asset Value’ is also referred to and is equivalent to ‘Mark to Market.’ Also, ICC proposes to change references from ‘‘P&L’’ in Table 3 and Table 4 to ‘‘P/L’’ to consistently refer to ‘profit or loss’ throughout the BackTesting Framework. Lastly, ICC proposes to update Section 6, ‘‘Revision History’’. (b) Statutory Basis ICC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 5 and the regulations thereunder applicable to it, including the applicable standards under Rule 17Ad–22.6 In particular, Section 17A(b)(3)(F) of the Act 7 requires, in part, that the rules of ICC (as a registered clearing agency) promote the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts and transactions cleared by ICC, assure the safeguarding of securities and funds in the custody or control of ICC or for which it is responsible, and protect investors and the public interest. The proposed amendments include enhancements on how expiring Index Swaptions are valued in back-testing. The additional revisions further ensure clarity and transparency with respect to ICC’s backtesting approach, procedures, and guidelines for remediating poor backtesting results. As such, ICC believes that the proposed rule change would help assure the soundness of the model by ensuring that back-testing analysis is conducted properly to assess the performance of the model. The proposed rule change is therefore consistent with the prompt and accurate clearing and settlement of the contracts cleared by ICC, the safeguarding of securities and funds in the custody or control of ICC or for which it is responsible, and the protection of investors and the public interest, within 5 15 U.S.C. 78q–1. CFR 240.17Ad–22. 7 15 U.S.C. 78q–1(b)(3)(F). 6 17 E:\FR\FM\14AUN1.SGM 14AUN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 89, No. 157 / Wednesday, August 14, 2024 / Notices the meaning of Section 17A(b)(3)(F) of the Act.8 Rules 17Ad–22(e)(2)(i) and (v) 9 require each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to provide for governance arrangements that are clear and transparent and specify clear and direct lines of responsibility. ICC’s Back-Testing Framework clearly assigns and documents responsibility and accountability for performing backtesting analyses and remediating poor back-testing results. The enhancements on how expiring Index Swaptions are treated in back-testing, the Back-Testing Framework would continue to ensure that ICC maintains clear and transparent governance procedures and arrangements with respect to the performance, review, and reporting of back-testing results and the remediation of poor back-testing results. As such, in ICC’s view, the proposed rule change continues to ensure that ICC maintains policies and procedures that are reasonably designed to provide for clear and transparent governance arrangements and specify clear and direct lines of responsibility, consistent with Rules 17Ad–22(e)(2)(i) and (v).10 Rule 17Ad–22(e)(4)(ii) 11 requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to effectively identify, measure, monitor, and manage its credit exposures to participants and those arising from its payment, clearing, and settlement processes, including by maintaining additional financial resources at the minimum to enable it to cover a wide range of foreseeable stress scenarios that include, but are not limited to, the default of the two participant families that would potentially cause the largest aggregate credit exposure for the covered clearing agency in extreme but plausible market conditions. As discussed above, the proposed revisions would enhance how expiring Index Swaptions are treated in back-testing. The additional revisions enhance the clarity and transparency of the Back-Testing Framework, which would strengthen the documentation and ensure that it remains up-to-date, clear, and transparent. ICC believes that the proposed changes would enhance ICC’s ability to manage risks and maintain appropriate financial resources, including by ensuring that back-testing analysis is conducted properly to assess the performance of the model. As such, the proposed amendments would strengthen ICC’s ability to maintain its financial resources and withstand the pressures of defaults, consistent with the requirements of Rule 17Ad– 22(e)(4)(ii).12 Rule 17Ad–22(e)(6)(vi) 13 requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to cover its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, is monitored by management on an ongoing basis and is regularly reviewed, tested, and verified by (A) conducting back-tests of its margin model at least once each day using standard predetermined parameters and assumptions; and (B) conducting a sensitivity analysis of its margin model and a review of its parameters and assumptions for backtesting on at least a monthly basis, and considering modifications to ensure the back-testing practices are appropriate for determining the adequacy of ICC’s margin resources. The Back-Testing Framework continues to require the performance of daily, weekly, monthly, and quarterly portfolio-level backtesting analyses, and the remediation of poor-back-testing results. The proposed amendments consist of enhancements to the treatment of expiring Index Swaptions for back-testing purposes, and other clarifications to the BackTesting Framework. These procedures in the Back-Testing Framework continue to promote the soundness of ICC’s model and ensure that ICC’s risk management system is effective and appropriate in addressing the risks associated with discharging its responsibilities. The proposed changes are thus consistent with the requirements of Rule 17Ad– 22(e)(6)(vi).14 (B) Clearing Agency’s Statement on Burden on Competition ICC does not believe the proposed rule change would have any impact, or impose any burden, on competition. The proposed changes to ICC’s BackTesting Framework will apply uniformly across all market participants. Therefore, ICC does not believe the proposed rule change imposes any burden on competition that is inappropriate in furtherance of the purposes of the Act. 8 Id. 9 17 CFR 240.17Ad–22(e)(2)(i) and (v). 10 Id. 11 17 12 Id. 13 17 CFR 240.17Ad–22(e)(4)(ii). VerDate Sep<11>2014 18:22 Aug 13, 2024 CFR 240.17Ad–22(e)(6)(vi). 14 Id. Jkt 262001 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 66155 (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed rule change have not been solicited or received. ICC will notify the Commission of any written comments received by ICC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules-regulations/self-regulatoryorganization-rulemaking); or • Send an email to rule-comments@ sec.gov. Please include file number SR– ICC–2024–008 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to file number SR–ICC–2024–008. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules-regulations/self-regulatoryorganization-rulemaking). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the E:\FR\FM\14AUN1.SGM 14AUN1 66156 Federal Register / Vol. 89, No. 157 / Wednesday, August 14, 2024 / Notices proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filings will also be available for inspection and copying at the principal office of ICE Clear Credit and on ICE Clear Credit’s website at https://www.ice.com/clearcredit/regulation. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–ICC–2024–008 and should be submitted on or before September 4, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–18077 Filed 8–13–24; 8:45 am] SECURITIES AND EXCHANGE COMMISSION ddrumheller on DSK120RN23PROD with NOTICES1 August 8, 2024. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on August 1, 2024, MIAX Sapphire, LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit VerDate Sep<11>2014 18:22 Aug 13, 2024 Jkt 262001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. The Exchange proposes to amend Exchange Rule 404, Series of Options Contracts Open for Trading. Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 404, Series of Option Contracts Open for Trading, To Modify the Strike Interval for Options on SPDR® Gold Shares CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. The Exchange proposes to amend Exchange 404, Series of Option Contracts Open for Trading. The text of the proposed rule change is available on the Exchange’s website at https://www.miaxglobal.com/markets/ us-options/miax-sapphire/rule-filings, at the Exchange’s principal office, and at the Commission’s Public Reference Room. 1. Purpose [Release No. 34–100672; File No. SR– SAPPHIRE–2024–06] 1 15 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P 15 17 comments on the proposed rule change from interested persons. Proposal The Exchange proposes to amend Exchange Rule 404, Series of Options Contracts Open for Trading. Specifically, the Exchange proposes to amend Interpretations and Policies .10 to allow for the interval between strike prices of series of options on ExchangeTraded Fund Shares 3 of SPDR® Gold Trust or ‘‘GLD’’ to be $1 or greater where the strike price is greater than $200. The Exchange also proposes to amend paragraph (g) to add rule text related to the interval between strike prices of series of options on ExchangeTraded Fund Shares to provide that the interval will be $1 or greater where the strike price is $200 or less and $5.00 or greater where the strike price is greater than $200. Today, Cboe Exchange, Inc. 3 Exchange-Traded Fund Shares include shares or other securities that are traded on a national securities exchange and are defined as an ‘‘NMS stock’’ under Rule 600 of Regulation NMS. See Exchange Rule 402(i). PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 (‘‘Cboe’’) permits the interval between strike prices of series of options on Exchange-Traded Fund Shares to be $1 or greater where the strike price is $200 or less and $5.00 or greater where the strike price is greater than $200.4 Today, the Exchange may fix the interval between strike prices of series of options on Exchange-Traded Fund Shares at such intervals as may have been established on another options exchange prior to the initiation of trading on the Exchange. The Exchange proposes to adopt Cboe’s language to provide a strike interval for Exchange-Traded Fund Shares in the event a different interval is not elected at a price per share which is reasonably close to the price per share at which the underlying security is traded in the primary market at or about the same time such series of options is first open for trading on the Exchange, or at such intervals as may have been established on another options exchange prior to the initiation of trading on the Exchange. Further, Policy .10 of Rule 404 allows for the interval between the strike prices of series of options on Exchange-Traded Fund Shares of the SPDR S&P 500 ETF (‘‘SPY’’), iShares S&P 500 Index ETF (‘‘IVV’’), Invesco QQQ Trust (‘‘QQQ’’), iShares Russell 2000 Index Fund (‘‘IWM’’), and the SPDR Dow Jones Industrial Average ETF (‘‘DIA’’) to be $1 or greater where the strike price is greater than $200. At this time, the Exchange proposes to modify the interval setting regime to be $1 or greater where the strike price is greater than $200 for GLD options, similar to SPY IVV, QQQ, IWM, and DIA. The Exchange believes that the proposed rule change would make GLD options easier for investors and traders to use and more tailored to their investment needs. GLD is an Exchange-Traded Fund Share designed to closely track the price and performance of gold bullion. GLD is widely quoted as an indicator of gold stock prices and is a significant indicator of overall economic health. Investors use GLD to diversify their portfolios and benefit from market trends. Additionally, GLD is a leading product in its asset class that trades within a ‘‘complex’’ where, in addition to the underlying security, there are multiple instruments available for hedging such as, COMEX Gold Futures; Gold Daily Futures; iShares GOLD Trust; SPDR GOLD Minishares Trust; Aberdeen Physical Gold Trust; and GraniteShares Gold Shares. 4 See Interpretation and Policy .07(a) of Cboe Rule 4.5. E:\FR\FM\14AUN1.SGM 14AUN1

Agencies

[Federal Register Volume 89, Number 157 (Wednesday, August 14, 2024)]
[Notices]
[Pages 66154-66156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18077]



[[Page 66154]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100679; File No. SR-ICC-2024-008]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the ICC Back-Testing 
Framework

August 8, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 30, 2024, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II and III below, which Items have been 
prepared primarily by ICC. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The principal purpose of the proposed rule change is to revise the 
ICE CDS Clearing: Back-Testing Framework (``Back-Testing Framework''). 
These revisions do not require any changes to the ICC Clearing Rules 
(the ``Rules'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICC included statements 
concerning the purpose of and basis for the proposed rule change, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. The text of these statements may be 
examined at the places specified in Item IV below. ICC has prepared 
summaries, set forth in sections (A), (B), and (C) below, of the most 
significant aspects of these statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Purpose
    ICC proposes revising the Back-Testing Framework, which describes 
ICC's back-testing approach and procedures and includes guidelines for 
remediating poor back-testing results. The proposed amendments enhance 
how credit default swap index options that expire in-the-money--within 
the margin period of risk, are treated for profit or loss purposes in 
back-testing and other clarifications. ICC believes that such revisions 
will facilitate the prompt and accurate clearance and settlement of 
securities transactions and derivative agreements, contracts, and 
transactions for which it is responsible. ICC proposes to make such 
changes effective following Commission approval of the proposed rule 
change. The proposed revisions are described in detail as follows.
    ICC proposes to enhance Subsection 2.4. of the Back-Testing 
Framework by adding a detailed description on how in-the-money 
(``ITM'') expiring credit default swap (``CDS'') index option (``Index 
Swaption'') positions, within the margin period of risk (``MPOR''),\3\ 
are treated in back-testing. Specifically, the proposed revisions 
enhance how Index Swaptions that expire ITM within the MPOR, are 
treated for profit or loss (``P/L'') purposes in back-testing. The 
proposed revisions provide that with respect to Index Swaptions that 
expire ITM within the MPOR, for back-testing calculation purposes, the 
mark to market (``MTM'') value of the expired ITM Index Swaption 
positions are replaced with their corresponding intrinsic values 
(``IV'') \4\ of such Index Swaptions based on their corresponding 
underlying CDS index's end-of-day price at the given back-testing day. 
The ITM Index Swaption position, with a positive IV, results in an 
option exercise on the expiration date and reflects the positive value 
to the option holder of buying/selling the underlying CDS index 
position at the fixed option strike price and selling/buying the 
underlying CDS index position at the end-of-day price for a profit. 
Likewise, the sold ITM Index Swaption position, with negative IV, 
results in the assignment of an underlying CDS index position to the 
seller of the option on the expiration date, where the assigned 
underlying CDS index position could be bought or sold protection 
position depending on the type of the sold option instrument. The 
unrealized P/L for the exercised/assigned ITM Swaption positions, 
within the MPOR, are computed against the underlying MTM, after the ITM 
Index Swaptions expiration date, for back-testing purposes.
---------------------------------------------------------------------------

    \3\ Margin-period-of-risk or MPOR for back testing purposes 
reflects the greatest considered risk horizon used for ICC's initial 
margin requirements.
    \4\ In the context of ITM Index Swaptions, intrinsic value or IV 
is the difference between the current price of the underlying CDS 
index and the Swaption's exercise price.
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    Also, ICC proposes the addition of Table 5, `Minimum 5-Day P/L 
Detail for Expiring Options Positions' to Subsection 2.4. Table 5 
provides an illustrative example of the computation of MTM and 
unrealized P/L for back-testing purposes for an ITM Index Swaption 
position that expires within the MPOR. The example calculation provided 
in Table 5 is intended to provide further transparency of ICC's back-
testing P/L treatment of ITM Index Swaptions that expire within the 
MPOR.
    ICC proposes additional clarifications to the Back-Testing 
Framework. The proposed amendments include the addition of footnote 1 
in Subsection 1.1 that clarifies `Net Asset Value' is also referred to 
and is equivalent to `Mark to Market.' Also, ICC proposes to change 
references from ``P&L'' in Table 3 and Table 4 to ``P/L'' to 
consistently refer to `profit or loss' throughout the Back-Testing 
Framework.
    Lastly, ICC proposes to update Section 6, ``Revision History''.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\6\ In particular, Section 17A(b)(3)(F) of the Act \7\ 
requires, in part, that the rules of ICC (as a registered clearing 
agency) promote the prompt and accurate clearance and settlement of 
securities transactions and derivative agreements, contracts and 
transactions cleared by ICC, assure the safeguarding of securities and 
funds in the custody or control of ICC or for which it is responsible, 
and protect investors and the public interest. The proposed amendments 
include enhancements on how expiring Index Swaptions are valued in 
back-testing. The additional revisions further ensure clarity and 
transparency with respect to ICC's back-testing approach, procedures, 
and guidelines for remediating poor back-testing results. As such, ICC 
believes that the proposed rule change would help assure the soundness 
of the model by ensuring that back-testing analysis is conducted 
properly to assess the performance of the model. The proposed rule 
change is therefore consistent with the prompt and accurate clearing 
and settlement of the contracts cleared by ICC, the safeguarding of 
securities and funds in the custody or control of ICC or for which it 
is responsible, and the protection of investors and the public 
interest, within

[[Page 66155]]

the meaning of Section 17A(b)(3)(F) of the Act.\8\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
    \6\ 17 CFR 240.17Ad-22.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ Id.
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    Rules 17Ad-22(e)(2)(i) and (v) \9\ require each covered clearing 
agency to establish, implement, maintain, and enforce written policies 
and procedures reasonably designed to provide for governance 
arrangements that are clear and transparent and specify clear and 
direct lines of responsibility. ICC's Back-Testing Framework clearly 
assigns and documents responsibility and accountability for performing 
back-testing analyses and remediating poor back-testing results. The 
enhancements on how expiring Index Swaptions are treated in back-
testing, the Back-Testing Framework would continue to ensure that ICC 
maintains clear and transparent governance procedures and arrangements 
with respect to the performance, review, and reporting of back-testing 
results and the remediation of poor back-testing results. As such, in 
ICC's view, the proposed rule change continues to ensure that ICC 
maintains policies and procedures that are reasonably designed to 
provide for clear and transparent governance arrangements and specify 
clear and direct lines of responsibility, consistent with Rules 17Ad-
22(e)(2)(i) and (v).\10\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \10\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(4)(ii) \11\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to effectively identify, measure, 
monitor, and manage its credit exposures to participants and those 
arising from its payment, clearing, and settlement processes, including 
by maintaining additional financial resources at the minimum to enable 
it to cover a wide range of foreseeable stress scenarios that include, 
but are not limited to, the default of the two participant families 
that would potentially cause the largest aggregate credit exposure for 
the covered clearing agency in extreme but plausible market conditions. 
As discussed above, the proposed revisions would enhance how expiring 
Index Swaptions are treated in back-testing. The additional revisions 
enhance the clarity and transparency of the Back-Testing Framework, 
which would strengthen the documentation and ensure that it remains up-
to-date, clear, and transparent. ICC believes that the proposed changes 
would enhance ICC's ability to manage risks and maintain appropriate 
financial resources, including by ensuring that back-testing analysis 
is conducted properly to assess the performance of the model. As such, 
the proposed amendments would strengthen ICC's ability to maintain its 
financial resources and withstand the pressures of defaults, consistent 
with the requirements of Rule 17Ad-22(e)(4)(ii).\12\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \12\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6)(vi) \13\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
participants by establishing a risk-based margin system that, at a 
minimum, is monitored by management on an ongoing basis and is 
regularly reviewed, tested, and verified by (A) conducting back-tests 
of its margin model at least once each day using standard predetermined 
parameters and assumptions; and (B) conducting a sensitivity analysis 
of its margin model and a review of its parameters and assumptions for 
back-testing on at least a monthly basis, and considering modifications 
to ensure the back-testing practices are appropriate for determining 
the adequacy of ICC's margin resources. The Back-Testing Framework 
continues to require the performance of daily, weekly, monthly, and 
quarterly portfolio-level back-testing analyses, and the remediation of 
poor-back-testing results. The proposed amendments consist of 
enhancements to the treatment of expiring Index Swaptions for back-
testing purposes, and other clarifications to the Back-Testing 
Framework. These procedures in the Back-Testing Framework continue to 
promote the soundness of ICC's model and ensure that ICC's risk 
management system is effective and appropriate in addressing the risks 
associated with discharging its responsibilities. The proposed changes 
are thus consistent with the requirements of Rule 17Ad-
22(e)(6)(vi).\14\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.17Ad-22(e)(6)(vi).
    \14\ Id.
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed rule change would have any 
impact, or impose any burden, on competition. The proposed changes to 
ICC's Back-Testing Framework will apply uniformly across all market 
participants. Therefore, ICC does not believe the proposed rule change 
imposes any burden on competition that is inappropriate in furtherance 
of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. ICC will notify the Commission of any written 
comments received by ICC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking); 
or
     Send an email to [email protected]. Please include 
file number SR-ICC-2024-008 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to file number SR-ICC-2024-008. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking). Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the

[[Page 66156]]

proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filings will also be available for 
inspection and copying at the principal office of ICE Clear Credit and 
on ICE Clear Credit's website at https://www.ice.com/clear-credit/regulation.
    Do not include personal identifiable information in submissions; 
you should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-ICC-2024-008 and should 
be submitted on or before September 4, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18077 Filed 8-13-24; 8:45 am]
BILLING CODE 8011-01-P
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